Maryland chooses private team to build, operate light-rail Purple Line

Maryland is moving forward with its plan to build a light rail train line between Bethesda and New Carrollton. Gov. Larry Hogan announced a contract proposal on March 2 that would open the 21-stop Purple Line by 2022. (WUSA9)

Maryland Gov. Larry Hogan (R) announced Wednesday that the state has chosen a team of private companies to build, operate and maintain a light-rail Purple Line in the Washington suburbs for $3.3 billion over 36 years.

Under the winning bid — proposed by the team Purple Line Transit Partners and led by construction giant Fluor Corporation — the six-year construction project would begin late this year, and the 16-mile line would open for service by spring 2022.

If approved by the state’s Board of Public Works on April 6, the contract would allow the Maryland Transit Administration to secure about $900 million in recommended federal construction aid. That would put the final funding in place to build the region’s first suburb-to-suburb rail link. The Purple Line also would be the first rail line to connect spokes of the Metrorail system, which was designed to carry federal workers between suburbs and the city.

It would be only the second U.S. transit project to involve private financing; the other is in Denver.

The Purple Line would run two-car trains mostly along local streets between Bethesda in Montgomery County and New Carrollton in Prince George’s County, inside the Capital Beltway. The 21 stations would include Silver Spring, Langley Park, the University of Maryland’s flagship College Park campus and Riverdale.

Maryland Transportation Secretary Pete K. Rahn called the proposed contract “very aggressive” and said the state’s total cost of $3.3 billion was $550 million below estimates. The 36-year public-private partnership would amount to a $5.6 billion contract, Rahn said. However, the state would end up paying $3.3 billion because the rest would be covered by federal funding, county contributions and the Purple Line’s fare revenue.

“We’re very pleased with this contract,” Rahn said during a conference call with reporters. “The companies involved are all experienced — they’re generally the largest within their fields. We’re confident we have [a team] committed to delivering this project.”

A spokeswoman for Purple Line Transit Partners referred questions to Maryland transportation officials.

The winning-bid team includes a Spanish rail car manufacturer that made the rail cars that a Metro spokesman called among the fleet’s “least reliable.” The company, CAF, provided Metro’s 5000-series rail cars in the early 2000s. The cars break down so often that Metro plans to replace them 20 years early.

CAF’s rail cars also have come under scrutiny in Houston for being delivered late and 8,000 pounds overweight, and in Kansas City, Mo., and Cincinnati for late deliveries.

Asked how confident he was in CAF’s ability to deliver high-quality Purple Line cars on time, Rahn said the contract includes financial penalties for the private consortium if the rail cars aren’t ready on schedule or do not provide reliable service.

“The responsibility for the performance of the Purple Line is on Purple Line Transit Partners,” Rahn said. “They have substantial incentives to deliver on what they committed to by contract.”

State officials say a Purple Line would provide faster and more reliable transit service than buses and would attract redevelopment around stations in aging, inner-Beltway suburbs. The line would be owned and operated by the MTA. Critics say the project is too expensive, would destroy a popular wooded recreational trail between Bethesda and Silver Spring, and would disrupt neighborhoods and businesses along the route.

Rahn repeatedly declined to say how much the line would cost to build compared with the previous $2.15 billion the state estimated. He said he focused on the state’s total net cost over 36 years — six years of construction and 30 years of operations — totaling ­$3.3 billion. The proposal chosen among four bids had the lowest overall cost and “the best technical scores by a substantial margin,” Rahn said.

The state would pay $159.8 mil- lion in upfront construction costs. The rest of the construction costs would be covered by about $900 million in federal aid and a combined $160 million pledged by Montgomery and Prince George’s counties. The counties also have pledged in-kind contributions, such as land.

After the line opens, the state would pay $149.4 million annually to cover the line’s operating and maintenance costs and pay off the private team’s construction debt. The state would pay the same amount regardless of how many people ride the line. Whatever annual costs aren’t covered by fare revenue would be paid out of the state’s transportation trust fund. The amount of those annual payments could be reduced if certain standards, such as clean stations and reliable service, aren’t met, state officials have said. The state would set fares.

Rahn said the upfront construction costs for the state would be $8 million lower than anticipated, and the annual payments would be $18 million less than predicted.

He said an additional $30 million in savings would come from design changes made to the Purple Line station at the Silver Spring Transit Center, although he didn’t cite specifics.

Purple Line Transit Partners is led by three companies: Fluor, Meridiam and Star America. All three have pledged to invest money in the project and manage it long-term. Rahn said the private team would finance about $1 billion of the line’s construction costs.

Experts say such arrangements ensure that the private sector shares in the financial risks because the companies have an incentive to build the rail line within budget and open it to revenue service on time. Public-private partnerships, if structured correctly, also encourage the private team to design and build a quality project that will be cost-efficient to operate and maintain, experts say.

Fluor would be the most extensively involved, from investing money to overseeing design, construction, operations and maintenance. Fluor says it is the largest publicly traded engineering and construction company in the United States.

Fluor designed and built 14 miles of Express toll lanes on Virginia’s portion of the Beltway and 29 miles of Express toll lanes on Interstate 95 between Stafford County and the Beltway. Both are public-private partnerships in which Fluor and its private partner, Transurban, covered most of the construction costs in exchange for lengthy contracts — 78 years on the Beltway lanes and 73 years on I-95. Transurban operates the lanes and keeps the toll revenue. Fluor exited both projects after completing construction.

“We found them to work very well on both projects — in the quality of their work, and they were on time and on budget, which are two key factors,” said Dusty Holcombe, deputy director of Virginia’s public-private partnership office.

Fluor, headquartered in Irving, Tex., also is managing partner on a 34-year public-private partnership being used to build and operate a 36-mile commuter rail system in Denver. The first segment is scheduled to open in April. The Denver Eagle project, budgeted to cost $2.2 billion, was the first public-private partnership on a U.S. rail project.

“They have people who can lead a project of this scope and magnitude,” Genova said, “and they have the expertise for the design and engineering and overseeing construction.”

Meridiam, a French investment firm, would provide 70 percent of the private team’s equity, according to a Meridiam news release. Meridiam makes long-term investments for pension funds and life insurance companies in public infrastructure projects, according to its website.

Star America, which is based in Roslyn Heights, N.Y., would provide­ 15 percent of the private equity, Meridiam said. Star America also invests in public infrastructure projects, according to its website.

Fluor would provide the other 15 percent of the private equity, Meridiam said.